Globalisation is bringing the countries of North and South America closer
together and in some cases eliminating monetary pluralism. One trend,
which has gone virtually unnoticed, is full dollarization in small countries
of Latin America, such as Ecuador and El Salvador, with Guatemala a
possible third candidate. Distinct from Argentina, these countries decided
to go a step further than fixed exchange rates and currency boards - they
have abandoned monetary policy altogether in favour of using U.S. dollars
for all transactions. Former Argentine president Carlos Menem argued for
this type of full dollarization for Argentina as well. In many other
countries the dollar is accepted as legal tender parallel with the national
currency and in all countries the dollar is a common substitute for business
transactions and investments. This trend will have a significant impact not
only on the types of monetary policy in the region but also on the quantity
of independent currencies. Monetary pluralism is slowly disappearing.
How far will it go and what are its effects for the region and the rest of the
world?

Print this page

While we understand printed pages are helpful to our users, this limitation is necessary
to help protect our publishers' copyrighted material and prevent its unlawful distribution.
We are sorry for any inconvenience.